New White Paper Highlights Superior Features of RTO, ISO Markets

The organized wholesale power markets operated by the Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) have proven to be the most economically efficient structure to ensure an adequate and reliable supply of affordable, diverse and increasingly clean electricity to meet the nation’s current and future economic, energy and environmental needs, a new report from COMPETE demonstrates.
The white paper, RTO and ISO Markets are Essential to Meeting Our Nation’s Economic, Energy and Environmental Needs, provides a thorough overview of the benefits these markets provide in terms of customer value, clean energy resources, innovative products and services, and investment in energy infrastructure.

The report was released today at an event on Capitol Hill featuring remarks by Federal Energy Regulatory Commissioner Philip Moeller. Other speakers included Shahid Malik, President of PSEG Energy Resources and Trade, Paige Miller, Senior Manager, Energy and Environment, for Rite Aid Kathleen, Carrigan of Energy Curtailment Specialists, and Allen Freifeld, Senior Vice President of Law and Public Policy for Viridity Energy.

“We’ve had more than a decade’s experience with organized wholesale electricity markets, and over that time they have clearly shown their ability to deliver tangible benefits to customers, the economy and the environment. That clear track record of success is highly attractive to customers, transmission providers, demand response companies and renewable energy providers, and has provided momentum for the growth and further evolution of organized wholesale electricity markets,” said the paper’s author, William Massey, former FERC Commissioner and counsel to COMPETE.

The white paper explains how organized wholesale electricity markets provide a superior platform for:
- Value to customers. Competition is producing efficiencies and cost savings totaling billions of dollars. Wholesale prices in these markets continue to fall, and in some markets prices are at their lowest point in almost a decade. Energy Information Administration and the Bureau of Labor Statistics data show that, between 1997 and 2011, retail rates in states within the RTO/ISO markets increased only 2.2% when adjusted for inflation, while those in states outside of organized competitive markets increased 8.5%. Retail rates for customers in the PJM footprint actually decreased by 1% over this period when adjusted for inflation.

- Clean energy. Renewable resource developers are attracted to the RTO/ISO markets by fair rules, large regional scope and transparent pricing. Over 75% of installed wind capacity is now located in regions with organized competitive electricity markets.

- Demand response. Customer-empowering demand response flourishes in RTO/ISO markets. Almost 32,000 MW of demand response are available in RTOs and ISOs, representing about 7% of the markets’ peak demand.

- Innovation. Innovators of state-of-the-art energy storage and demand resources are choosing to install their advanced technologies in the RTO/ISO markets because of the ease of entry, level playing field, non-discriminatory rules and transparent prices.

- Smart grid. These transformative technologies will be most effectively realized in the RTO/ISO markets where transparent and credible price signals give consumers the information they need to make smart efficiency decisions. The organized markets will provide the most “bang for the buck” from our nation’s investment in the Smart Grid.

- Infrastructure investment. The RTO/ISO markets have proven attractive to generation developers, in particular wind energy developers. In the organized markets, investors bear the risk the investment, thereby protecting consumers from the costs of bad business decisions and cost overruns.

- Efficiency. Organized competitive markets have produced documented efficiency improvements. In RTOs and ISOs, the heat rates of coal-fired generators improved 9.4% between 1998 and 2007, and the utilization rate of nuclear plants increased from 81% to 93% between 1996 and 2007.

“The RTOs and ISOs are providing the level playing field, customer tools and efficient markets that are proving to be essential in achieving these goals while holding down costs for consumers,” the white paper concludes.